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Supply and Demand in a Competitive Market

What effect should each of the following have on the demand for gasoline in a competitive market? (Increase, Decrease or no change)?
On Demand:

1. more gas stations are built _________

On Supply:
5. an increase in the price of electronic equipment in making tvs ___
6. a decline in the number of firms producing tvs. _______
7. new satellite dishes which make tvs more popular for consumers. ___

Choose the letter a, b, c, d of the diagram (Shown in the attachment) that best describes the type of shift that would occur in each situation for the market listed on the left, ceteris paribus

Shifts of supply and demand

____Ans. Digital cameras: An improvement in technology reduces the cost of producing digital cameras.

____Ans. 2007 model cars: 2008 model cars are introduced for purchase in the market, and consumers prefer the new cars.

____Ans. Current model year cars: Consumer confidence in the economy improves.

____Ans. Steel: The government introduces environmental restrictions on the dumping of wastes from producing steel.

____Ans. Flat screen TVs: The technology required for flat screen TVs production becomes cheaper.

____Ans. Housing: The cost of lumber increases because the United States restricts the import of lumber from Canada.

____Ans. Candy bars: People become more health-wise and prefer power bars instead of candy bars.

____Ans. All goods and services: The level of income increases for all consumers.

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Solution Preview

On Demand:

1. more gas stations are built __No change
More stations causes an increase in supply, but not in demand

On Supply:
5. an increase in the price of electronic equipment in making tvs __decrease
6. a decline in the number of firms producing tvs. ____decrease
7. new satellite dishes which make tvs more popular for consumers. __no change
(changes demand but not supply)

Choose the letter a, b, c, d of the diagram (Shown in the attachment) that best describes the type of shift that would occur in ...

Solution Summary

Shifts of supply and demand

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